Effect of the Tax Cuts and Jobs Act on Trust and Estate Planning

The Tax Cuts and Jobs Act, signed into law on December 22, 2017, includes significant changes to the U.S. federal gift, estate, and generation-skipping transfer (GST) tax laws, effective as of January 1, 2018. In addition, certain income tax changes may also affect trust and estate planning.

Federal gift, estate and GST tax exemption amounts are doubled. Federal gift and estate taxes apply at a rate of up to 40%. Each individual who is a citizen or resident of the U.S. is allowed a lifetime exclusion amount, which may be used to shelter transfers made during life or at death from gift and estate taxes. Under the new law, for estates of individuals dying and transfers made on or after January 1, 2018, the gift and estate tax exclusion is doubled to approximately $11.2 million per person ($22.4 million for a couple), and will continue to be adjusted for inflation in future years. In certain cases, a surviving spouse may use a deceased spouse’s unused exclusion amount.